Institute of Legal and Management Studies

The Supreme Court has held once a complainant signs a compromise deed acknowledging receipt of the full settlement amount, the conviction under Section 138 of the Negotiable Instruments Act cannot be sustained.

The Court set aside an order of the High Court which dismissed an application filed by the accused seeking alteration of his conviction based on the settlement arrived at with the complainant after the dismissal of his revision petition.

Allowing the appeal, the Supreme Court said, “Once the complainant has signed the compromise deed accepting the amount in full and final settlement of the default sum the proceedings under Section 138 of the NI Act cannot hold water, therefore, the concurrent conviction rendered by the Courts below has to be set-aside.”

A bench of Justices Aravind Kumar and Sandeep Mehta heard an appeal concerning the compounding of an offence under Section 138 of the Negotiable Instruments Act. The matter reached the Supreme Court after the High Court dismissed an application by the accused seeking modification of its revision order that had upheld his conviction. The application was based on a subsequent compromise deed, in which the complainant had accepted a payment as full and final settlement of the defaulted sum. The High Court had rejected the application, citing non-maintainability.

Setting aside the High Court's decision and acquitting the appellant-accused, the Court taking into account a beneficial provision of Section 147 of NI Act, which makes cheque dishonor offences a compoundable offence, observed that since the complainant had arrived at a compromise with appellant without any coercion and at his own will and voluntarily accepting the default sum in full and final settlement, then the proceedings under Section 138 NI Act would be of no use.

In support, the Court relied on M/s. Gimpex Private Limited v. Manoj Goel (2021), where it was observed that “Once parties voluntarily entered into such an agreement and agree to abide by the consequence of non-compliance of the settlement agreement, they cannot be allowed to reverse the effects of the agreement by pursuing both the original complaint and the subsequent complaint arising from such non-compliance.”

Accordingly, the appeal was allowed, and the conviction was set aside.

Cause Title: GIAN CHAND GARG VERSUS HARPAL SINGH & ANR.

Citation : 2025 LiveLaw (SC) 865

Click here to read/download the order

Appearance:

For Petitioner(s) Mr. Aftab Ali Khan, Adv. Ms. Arna Das, Adv. Mr. Naresh Kumar, AOR

For Respondent(s) Mr. Jay Kishor Singh, AOR Dr. Rishi Pal Singh Garttan, Adv.